A Bandage, Not A Cure, For Student Loans
INDIANAPOLIS—The White House announced plans the other day to cancel a significant slice of outstanding student debt for qualifying Americans.
President Joe Biden’s administration indicated it would waive $10,000 worth of student debt for most people and $20,000 for Pell Grant recipients. To qualify, those carrying the loans must earn less than $125,000 per year—or, if part of a married couple, less than $250,000 annually.
The plan also would extend the pandemic-driven pause on student loan payments until the end of 2022.
The White House estimated that roughly 43 million Americans would be eligible for some debt relief—and as many as 20 million of them could have their college loan debt eliminated altogether.
Many Americans, no doubt, find this to be welcome news. Buried under debt they may have carried for years, even decades, they view any lightening of that load with relief—and the removal of the weight entirely almost as a form of deliverance.
Many others won’t like the Biden plan. They argue issues of equity—that people who took out loans and already have paid them off receive no similar relief or compensation. They also are troubled by the notion of having taxpayers pick up the tab once again.
As is often the case when Americans are at odds with each other, both sides have valid points.
And neither side seems inclined to listen to the other or grant any credence to contrary points of view or arguments.
So it goes with so many of our debates these days.
Lost in the noise generated by this argument is one fundamental, even essential truth.
That is that the entire student loan program has lost its way and needs to be restructured so that it serves something resembling its original purpose.
As originally conceived, the student loan program was designed to be a sturdy rung up the ladder of economic achievement. The interest rates were minimal—even negligible—because the purpose of the loans was to encourage young Americans to pursue educational opportunities. The thinking was that better-educated people would make for more responsible, well-informed citizens and a better-trained and more productive workforce.
The loans were, in two important ways, investments.
They allowed Americans from families of more modest means to leverage increased future earnings to create greater opportunities for themselves and the families they hoped to build.
The loans also were a way for the United States to invest in a future that would be ever more reliant on knowledge and specialized skills. Fronting the money for young people to attend was considered a way for the nation to bolster its own fortunes.
The problem was that the student loan system, like all human structures, had its flaws.
Not the least of them was that many people took out student loans and then didn’t pay them back. The low interest rates worked almost as a disincentive for collection efforts. Because there wasn’t much money to be made by chasing down the non-payers, a disturbingly large number of loans were written off.
Then, about 40 years ago, the deep thinkers in our political system did what they so often do.
They decided that, because some people abused the system, the entire system should be restructured in ways that affected everyone. Rather than figure out ways to hold those who took unfair or unethical advantage of the process accountable, they increased the interest on the loans and made them much more difficult for even the poorest borrower to discharge.
It was as if we as a society decided that because some people speed in school zones, everyone everywhere should lose the right to drive a car.
With the changes, a program that was designed to be a doorway to opportunity instead became a barrier.
And there are more than enough barriers to success and opportunity in this country without adding still another one.
The Biden plan for easing student loan debt loads doubtless will help many people, most of whom have been burdened by long-ago “reforms†that diverted the program from its original wise and noble intentions.
But it isn’t a solution to the student-loan problem.
Not by a long shot.
FOOTNOTE: John Krull is director of Franklin College’s Pulliam School of Journalism and publisher of TheStatehouseFile.com, a news website powered by Franklin College journalism students. The opinions expressed by the author do not represent the views of Franklin College.
The City-County Observer posted this article without bias or editing.
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